Dr. Joan Leongson-San Juan, M.D.

July 16, 2001 SEC OPINION Dr. Joan Leongson-San Juan, M.D. Antipolo Doctors Hospital M.L. Quezon Avenue Extension, Antipolo City Dear Dr. San Juan, This has reference to your letter dated February 28, 2001, inquiring on the validity of an alleged resolution approved by the stockholders of Antipolo Doctors, Inc. imposing restrictions on the sale of common stocks, as follows: "(1) Sale of common stocks must first be offered to existing stockholders of record; (2) Price must not exceed the book value of the stock at the time of sale; (3) If no taker within a period of three years from date of offer, then the seller can validly offer the same to a third party; (4) Common Stock can not be used or assigned for payment of debt nor as a pledge. Anent thereto, Section 6 of the Corporation Code of the Philippines provides: "Section 6. Classification of Shares . The shares of stock in corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such restrictions as may be stated in the articles of incorporation :... Thus, to be legally effective, the rights, privileges, preferences and restrictions of a certain class, series of shares or both must be stated in the articles of incorporation. Furthermore, considering that shares of stock burdened with restrictions on transferability may fall into the hands of innocent purchasers, the SEC likewise ruled that restrictions shall be printed on the stock certificates of the corporation. (Lopez, Corporation C od e of the Philippines, p. 91) In the absence of an express restriction in the articles of incorporation and stock certificate, a stockholder may equally dispose of or sell his shares to anybody without a need of waiver from the remaining stockholders. ( supra ) Section 63 of the Corporation Code expressly provides that "shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other persons authorized to make the transfer." As such, the owner as in the case of other personal property has the absolute and inherent right, as an incident of his ownership, to sell and transfer the same at will except insofar as the right may be restricted by the charter of the corporation or the general law, or a valid agreement between him and the corporation . . . (SEC Opinion dtd. August 8, 1986 addressed to Private Development Corporation of the Philippines) As verified from the records of Antipolo Doctors, Inc.,its articles of incorporation and by-laws do not provide for any restriction on the sale or transfer of shares of stock of the corporation. The aforementioned restrictions were, as stated in your letter, approved merely through a stockholders' resolution. Ergo, the same can not be validly imposed upon the stockholders. Clearly from the above elucidated provision of the Corporation Code, classification of shares and its privileges, and restrictions on transfer of shares should be set out in the articles of incorporation. In the absence of such provisions, the stockholders, in the exercise of their right of ownership, have the unqualified right to dispose of their shares in accordance with law. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner